(a) A cost is allowable only when the cost complies with all of the following requirements:
(1) Reasonableness.
(2) Allocability.
(3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circ*mstances.
(4) Terms of the contract.
(5) Any limitations set forth in this subpart.
(b) Certain cost principles in this subpart incorporate the measurement, assignment, and allocability rules of selected CAS and limit the allowability of costs to the amounts determined using the criteria in those selected standards. Only those CAS or portions of standards specifically made applicable by the cost principles in this subpart are mandatory unless the contract is CAS-covered (see part 30). Business units that are not otherwise subject to these standards under a CAS clause are subject to the selected standards only for the purpose of determining allowability of costs on Government contracts. Including the selected standards in the cost principles does not subject the business unit to any other CAS rules and regulations. The applicability of the CAS rules and regulations is determined by the CAS clause, if any, in the contract and the requirements of the standards themselves.
(c) When contractor accounting practices are inconsistent with this subpart 31.2, costs resulting from such inconsistent practices in excess of the amount that would have resulted from using practices consistent with this subpart are unallowable.
(d) A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements. The contracting officer may disallow all or part of a claimed cost that is inadequately supported.
FAQs
(a) The factors to be considered in determining whether a cost is allowable include the following: (1) Reasonableness. (2) Allocability. (3) Standards promulgated by the CAS Board, if applicable; otherwise, generally accepted accounting principles and practices appropriate to the particular circ*mstances.
What is allowability of cost policy? ›
Federal guidelines outline what types of costs are allowable (able to be charged to a grant or contract), and those that are unallowable (those that cannot be charged.) All expenses charged to sponsored accounts must: Be allowable.
Can a cost be allocable to a contract but not allowable? ›
(a) A cost is allowable only when the cost complies with all of the following requirements: (1) Reasonableness. (2) Allocability. (3) Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circ*mstances.
Is severance pay allowable under FAR? ›
Payments made for involuntary terminations are allowable subject to the provisions contained in FAR 31.205-6, while payments made for voluntary terminations are unallowable. (4) the circ*mstances of the particular employment. Normal severance pay should be allocated to all work performed in the contractor's plant.
What are allowable and unallowable costs? ›
Allowable costs are charges incurred by a program that can be covered with your Office of Justice Programs (OJP) grant. Unallowable costs are charges incurred by a program that cannot be covered or reimbursed by your OJP grant. requested in a budget is awarded, does not ensure a determination of allowability.
What are expressly unallowable costs in FAR 31? ›
Unallowable Costs in Government Contracts. The federal government will not reimburse contractors for certain expenses, known as unallowable costs. Common unallowable expenses include entertainment, alcohol, company parties and certain travel expenses. These are defined in FAR 31.
What is cost allowability matrix? ›
The Allowable Cost Matrix is a tool created to assist accounting and finance staff with making decisions related to Institute expenses. The matrix provides a vehicle to determine if certain expenses are allowable on certain fund types.
Is unallowable cost illegal? ›
Unallowable costs are prohibited from any billing, proposal or claim. Also, penalties can be assessed for passing such costs onto the government.
What is total amount of allowable expenses? ›
Allowable expenses are costs that are essential and directly related to running your business. These expanses can be deducted from your taxable income, reducing your overall Income Tax liability. Allowable expenses do not include money taken from your business to pay for personal purchases.
What makes a cost allocable? ›
A cost is allocable to a particular cost objective (i.e., a specific function, project, sponsored agreement, department, or the like) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.
Allowable expenses are not taxable and reduce how much tax you pay on your profits. Disallowable expenses are taxable and cannot be written off at tax time. Expenses may be allowable if they are wholly and completely incurred by the normal, everyday costs of running a business.
What does it mean that a cost is allocable? ›
A cost is allocable if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship.
What is needed to make a normally reasonable cost an allowable expense in a grant? ›
The cost must be consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the subrecipient. allowable costs based on funding source.
What are the three criteria that must be met for certain costs to be reported as joint costs? ›
Not all activities that include both program and fundraising components qualify for joint cost allocation. NFPs need to evaluate three criteria related to the purpose, audience, and content of the activity to determine if joint cost allocation is permitted.
What makes a cost reasonable? ›
A determination that a price is fair and reasonable is really a conclusion that the proposed price is fair to both parties, considering the quality, delivery and other factors.
What does allowable costs mean in healthcare? ›
The maximum amount a plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.” If your provider charges more than the plan's allowed amount, you may have to pay the difference. (
